J.5.10 Why do anarchists support co-operatives?

Support for co-operatives is a common feature in anarchist writings. Indeed, anarchist support for co-operatives is as old as use of the term anarchist to describe our ideas is. So why do anarchists support co-operatives? Basically it is because a co-operative is seen as an example of the future social organisation anarchists want in the present. As Bakunin argued, “the co-operative system. . . carries within it the germ of the future economic order.” [The Philosophy of Bakunin, p. 385]

Anarchists support all kinds of co-operatives – housing, food, credit unions and productive ones. All forms of co-operation are useful as they accustom their members to work together for their common benefit as well as ensuring extensive experience in managing their own affairs. As such, all forms of co-operatives are useful examples of self-management and anarchy in action (to some degree). However, here we will concentrate on productive co-operatives, i.e. workplace co-operatives. This is because workplace co-operatives, potentially, could replace the capitalist mode of production with one based upon associated, not wage, labour. As long as capitalism exists within industry and agriculture, no amount of other kinds of co-operatives will end that system. Capital and wealth accumulates by oppression and exploitation in the workplace, therefore as long as wage slavery exists anarchy will not.

Co-operatives are the “germ of the future” because of two facts. Firstly, co-operatives are based on one worker, one vote. In other words those who do the work manage the workplace within which they do it (i.e. they are based on workers’ self-management in some form). Thus co-operatives are an example of the “horizontal” directly democratic organisation that anarchists support and so are an example of “anarchy in action” (even if in an imperfect way) within the economy. In addition, they are an example of working class self-help and self-activity. Instead of relying on others to provide work, co-operatives show that production can be carried on without the existence of a class of masters employing a class of order takers.

Workplace co-operatives also present evidence of the viability of an anarchist “economy.” It is well established that co-operatives are usually more productive and efficient than their capitalist equivalents. This indicates that hierarchical workplaces are not required in order to produce useful goods and indeed can be harmful. Indeed, it also indicates that the capitalist market does not actually allocate resources efficiently (as we will discuss in section J.5.12). So why should co-operatives be more efficient?

Firstly there are the positive effects of increased liberty associated with co-operatives.

Co-operatives, by abolishing wage slavery, obviously increases the liberty of those who work in them. Members take an active part in the management of their working lives and so authoritarian social relations are replaced by libertarian ones. Unsurprisingly, this liberty also leads to an increase in productivity – just as wage labour is more productive than slavery, so associated labour is more productive than wage slavery. Little wonder Kropotkin argued that “the only guarantee not to be robbed of the fruits of your labour is to possess the instruments of labour. . . man really produces most when he works in freedom, when he has a certain choice in his occupations, when he has no overseer to impede him, and lastly, when he sees his work bringing profit to him and to others who work like him, but bringing in little to idlers.” [The Conquest of Bread, p. 145]

There are also the positive advantages associated with participation (i.e. self-management, liberty in other words). Within a self-managed, co-operative workplace, workers are directly involved in decision making and so these decisions are enriched by the skills, experiences and ideas of all members of the workplace. In the words of Colin Ward:

“You can be in authority, or you can be an authority, or you can have authority. The first derives from your rank in some chain of command, the second derives special knowledge, and the third from special wisdom. But knowledge and wisdom are not distributed in order of rank, and they are no one person’s monopoly in any undertaking. The fantastic inefficiency of any hierarchical organisation — any factory, office, university, warehouse or hospital — is the outcome of two almost invariable characteristics. One is that the knowledge and wisdom of the people at the bottom of the pyramid finds no place in the decision-making leadership hierarchy of the institution. Frequently it is devoted to making the institution work in spite of the formal leadership structure, or alternatively to sabotaging the ostensible function of the institution, because it is none of their choosing. The other is that they would rather not be there anyway: they are there through economic necessity rather than through identification with a common task which throws up its own shifting and functional leadership.”Perhaps the greatest crime of the industrial system is the way it systematically thwarts the investing genius of the majority of its workers.”

[Anarchy in Action, p. 41]

Also, as workers also own their place of work, they have an interest in developing the skills and abilities of their members and, obviously, this also means that there are few conflicts within the workplace. Unlike capitalist firms, there is no need for conflict between bosses and wage slaves over work loads, conditions or the division of value created between them. All these factors will increase the quality, quantity and efficiency of work and so increases efficient utilisation of available resources and facilities the introduction of new techniques and technologies.

Secondly, the increased efficiency of co-operatives results from the benefits associated with co-operation itself. Not only does co-operation increase the pool of knowledge and abilities available within the workplace and enriches that source by communication and interaction, it also ensures that the workforce are working together instead of competing and so wasting time and energy. As Alfie Kohn notes (in relation to investigations of in-firm co-operation):

“Dean Tjosvold of Simon Frazer. . .conducted [studies] at utility companies, manufacturing plants, engineering firms, and many other kinds of organisations. Over and over again, Tjosvold has found that ‘co-operation makes a work force motivated’ whereas ‘serious competition undermines co-ordination.’ . . . Meanwhile, the management guru. . . T. Edwards Demming, has declared that the practice of having employees compete against each other is ‘unfair [and] destructive. We cannot afford this nonsense any longer. . . [We need to] work together on company problems [but] annual rating of performance, incentive pay, [or] bonuses cannot live with team work. . . What takes the joy out of learning. . .[or out of] anything? Trying to be number one.'” [No Contest, p. 240]

(The question of co-operation and participation within capitalist firms will be discussed in section J.5.12).

Thirdly, there are the benefits associated with increased equality. Studies prove that business performance deteriorates when pay differentials become excessive. In a study of over 100 businesses (producing everything from kitchen appliances to truck axles), researchers found that the greater the wage gap between managers and workers, the lower their product’s quality. [Douglas Cowherd and David Levine, “Product Quality and Pay Equity,”Administrative Science Quarterly no. 37 (June 1992), pp. 302-30] Businesses with the greatest inequality were plagued with a high employee turnover rate. Study author David Levine said: “These organisations weren’t able to sustain a workplace of people with shared goals.” [quoted by John Byrne in “How high can CEO pay go?”Business Week, April 22, 1996]

(In fact, the negative effects of income inequality can be seen on a national level as well. Economists Torsten Persson and Guido Tabellini conducted a thorough statistical analysis of historical inequality and growth, and found that nations with more equal incomes generally experience faster productive growth. [“Is Inequality Harmful for Growth?”, American Economic Review no. 84, June 1994, pp. 600-21] Numerous other studies have also confirmed their findings. Real life yet again disproves the assumptions of capitalism – inequality harms us all, even the capitalist economy which produces it).

This is to be expected. Workers, seeing an increasing amount of the value they create being monopolised by top managers and a wealthy elite and not re-invested into the company to secure their employment prospects, will hardly be inclined to put in that extra effort or care about the quality of their work. Managers who use the threat of unemployment to extract more effort from their workforce are creating a false economy. While they will postpone decreasing profits in the short term due to this adaptive strategy (and enrich themselves in the process) the pressures placed upon the system will bring a harsh long term effects – both in terms of economic crisis (as income becomes so skewed as to create realisation problems and the limits of adaptation are reached in the face of international competition) and social breakdown.

As would be imagined, co-operative workplaces tend to be more egalitarian than capitalist ones. This is because in capitalist firms, the incomes of top management must be justified (in practice) to a small number of individuals (namely, those shareholders with sizeable stock in the firm), who are usually quite wealthy and so not only have little to lose in granting huge salaries but are also predisposed to see top managers as being very much like themselves and so are entitled to comparable incomes. In contrast, the incomes of top management in worker controlled firms have to be justified to a workforce whose members experience the relationship between management incomes and their own directly and who, no doubt, are predisposed to see their top managers as being workers like themselves and accountable to them. Such an egalitarian atmosphere will have a positive impact on production and efficiency as workers will see that the value they create is not being accumulated by others but distributed according to work actually done (and not control over power). In the Mondragon co-operatives, for example, the maximum pay differential is 14 to 1 (increased from 3 to 1 in a response to outside pressures after much debate, with the actual maximum differential at 9 to 1) while (in the USA) the average CEO is paid over 140 times the average factory worker (up from 41 times in 1960).

Therefore, we see that co-operatives prove (to a greater or lesser extent) the advantages of (and interrelationship between) key anarchist principles such as liberty, equality, solidarity and self-management. Their application, whether all together or in part, has a positive impact on efficiency and work — and, as we will discuss in section J.5.12, the capitalist market actively blocks the spread of more efficient productive techniques instead of encouraging them. Even by its own standards, capitalism stands condemned – it does not encourage the efficient use of resources and actively places barriers in the development of human “resources.”

From all this its clear to see why co-operatives are supported by anarchists. We are “convinced that the co-operative could, potentially, replace capitalism and carries within it the seeds of economic emancipation. . . The workers learn from this precious experience how to organise and themselves conduct the economy without guardian angels, the state or their former employers.” [Michael Bakunin, Op. Cit., p. 399] Co-operatives give us a useful insight into the possibilities of a free, socialist, economy. Even within the hierarchical capitalist economy, co-operatives show us that a better future is possible and that production can be organised in a co-operative fashion and that by so doing we can reap the individual and social benefits of working together as equals.

However, this does not mean that all aspects of the co-operative movement find favour with anarchists. As Bakunin pointed out, “there are two kinds of co-operative: bourgeois co-operation, which tends to create a privileged class, a sort of new collective bourgeoisie organised into a stockholding society: and truly Socialist co-operation, the co-operation of the future which for this very reason is virtually impossible of realisation at present.” [Op. Cit., p. 385] In other words, while co-operatives are the germ of the future, in the present they are often limited by the capitalist environment they find themselves and narrow their vision to just surviving within the current system.

For most anarchists, the experience of co-operatives has proven without doubt that, however excellent in principle and useful in practice, if they are kept within the narrow circle of “bourgeois” existence they cannot become dominant and free the masses. This point is argued in Section J.5.11 and so will be ignored here. In order to fully develop, co-operatives must be part of a wider social movement which includes community and industrial unionism and the creation of a anarchistic social framework which can encourage “truly Socialist co-operation” and discourage “bourgeois co-operation.” As Murray Bookchin correctly argues, “[r]emoved from a libertarian municipalist [or other anarchist] context and movement focused on achieving revolutionary municipalist [or communalist] goals as a dual power against corporations and the state, food [and other forms of] co-ops are little more than benign enterprises that capitalism and the state can easily tolerate with no fear of challenge.” [Democracy and Nature no. 9, p. 175]

Therefore, while co-operatives are an important aspect of anarchist ideas and practice, they are not the be all or end all of our activity. Without a wider social movement which creates all (or at least most) of the future society in the shell of the old, co-operatives will never arrest the growth of capitalism or transcend the narrow horizons of the capitalist economy.

Supporters of capitalism suggest that producer co-operatives would spring up spontaneously if workers really wanted them. Their argument is that co-operatives could be financed at first by “wealthy radicals” or by affluent workers pooling their resources to buy out existing capitalist firms; then, if such co-operatives were really economically viable and desired by workers, they would spread until eventually they undermined capitalism. They conclude that since this is not happening, it must be because workers’ self-management is either economically unfeasible or is not really attractive to workers or both (see, for example, Robert Nozick, Anarchy, State, and Utopia, pp. 250-52).

David Schweickart has decisively answered this argument by showing that the reason there are not more producer co-operatives is structural:

“A worker-managed firm lacks an expansionary dynamic. When a capitalist enterprise is successful, the owner can increase her profits by reproducing her organisation on a larger scale. She lacks neither the means nor the motivation to expand. Not so with a worker-managed firm. Even if the workers have the means, they lack the incentive, because enterprise growth would bring in new workers with whom the increased proceeds would have to be shared. Co-operatives, even when prosperous, do not spontaneously grow. But if this is so, then each new co-operative venture (in a capitalist society) requires a new wealthy radical or a new group of affluent radical workers willing to experiment. Because such people doubtless are in short supply, it follows that the absence of a large and growing co-operative movement proves nothing about the viability of worker self-management, nor about the preferences of workers.” [Against Capitalism, p. 239]

There are other structural problems as well. For one thing, since their pay levels are set by members’ democratic vote, co-operatives tend to be more egalitarian in their income structure. But this means that in a capitalist environment, co-operatives are in constant danger of having their most skilled members hired away. Moreover, there is a difficulty in raising capital:

“Quite apart from ideological hostility (which may be significant), external investors will be reluctant to put their money into concerns over which they will have little or no control — which tends to be the case with a co-operative. Because co-operatives in a capitalist environment face special difficulties, and because they lack the inherent expansionary dynamic of a capitalist firm, it is hardy surprising that they are far from dominant.” [Ibid., p 240]

In addition, co-operatives face the negative externalities generated by a capitalist economy. The presence of wage labour and investment capital in the economy will tempt successful co-operatives to increase their flexibility to adjust to changes in market changes by hiring workers or issuing shares to attract new investment. In so doing, however, they may end up losing their identities as co-operatives by diluting ownership or by making the co-operative someone’s boss:

“To meet increased production, the producer co-operatives hired outside wage workers. This created a new class of workers who exploit and profit from the labour of their employees. And all this fosters a bourgeois mentality.” [Michael Bakunin, Bakunin on Anarchism, p. 399]

Hence the pressures of working in a capitalist market may result in co-operatives pursuing activities which may result in short term gain or survival, but are sure to result in harm in the long run. Far from co-operatives slowly expanding within and changing a capitalist environment it is more likely that capitalist logic will expand into and change the co-operatives that work in it (this can be seen from the Mondragon co-operatives, where there has been a slight rise in the size of wage labour being used and the fact that the credit union, since 1992, has invested in non-co-operative firms). These externalities imposed upon isolated co-operatives within capitalism (which would not arise within a fully co-operative context) block local moves towards anarchism. The idea that co-operation will simply win out in competition within well developed capitalist economic systems is just wishful thinking. Just because a system is more liberatory and just does not mean it will survive in an authoritarian economic and social environment.

There are also cultural problems as well. As Jon Elster points out, it is a “truism, but an important one, that workers’ preferences are to a large extent shaped by their economic environment. Specifically, there is a tendency to adaptive preference formation, by which the actual mode of economic organisation comes to be perceived as superior to all others.” [“From Here to There”, in Socialism, p. 110] In other words, people view “what is” as given and feel no urge to change to “what could be.” In the context of creating alternatives within capitalism, this can have serious effects on the spread of alternatives and indicates the importance of anarchists encouraging the spirit of revolt to break down this mental apathy.

This acceptance of “what is” can be seen, to some degree, by some companies which meet the formal conditions for co-operatives, for example ESOP owned firms in the USA, but lack effective workers’ control. ESOP (Employee Stack Ownership Plans) firms enable a firms workforce to gain the majority of a companies shares but the unequal distribution of shares amongst employees prevents the great majority of workers from having any effective control or influence on decisions. Unlike real co-operatives (based on “one worker, one vote”) these firms are based on “one share, one vote” and so have more in common with capitalist firms than co-operatives.

Moreover, we have ignored such problems as natural barriers to entry into, and movement within, a market (which is faced by all firms) and the difficulties co-operatives can face in finding access to long term credit facilities required by them from capitalist banks (which would effect co-operatives more as short term pressures can result in their co-operative nature being diluted). As Tom Cahill notes, the “old co-ops [of the nineteenth century] also had the specific problem of . . . giving credit . . . [as well as] problems . . . of competition with price cutting capitalist firms, highlighting the inadequate reservoirs of the under-financed co-ops.” [“Co-operatives and Anarchism: A contemporary Perspective”, in For Anarchism, edited by Paul Goodway, p. 239]

In addition, the “return on capital is limited” in co-operatives [Tom Cahill, Op. Cit., p. 247] which means that investors are less-likely to invest in co-operatives, and so co-operatives will tend to suffer from a lack of investment. Which also suggests that Nozick’s argument that “don’t say that its against the class interest of investors to support the growth of some enterprise that if successful would end or diminish the investment system. Investors are not so altruistic. They act in personal and not their class interests” is false [Op. Cit., pp. 252-3]. Nozick is correct, to a degree — but given a choice between high returns from investments in capitalist firms and lower ones from co-operatives, the investor will select the former. This does not reflect the productivity or efficiency of the investment — quite the reverse! — it reflects the social function of wage labour in maximising profits and returns on capital (see next section for more on this). In other words, the personal interests of investors will generally support their class interests (unsurprisingly, as class interests are not independent of personal interests and will tend to reflect them!).

Tom Cahill outlines the investment problem when he writes that the “financial problem” is a major reason why co-operatives failed in the past, for “basically the unusual structure and aims of co-operatives have always caused problems for the dominant sources of capital. In general, the finance environment has been hostile to the emergence of the co-operative spirit. . .” And he also notes that they were “unable to devise structuring to maintain a boundary between those who work and those who own or control. . . It is understood that when outside investors were allowed to have power within the co-op structure, co-ops lost their distinctive qualities.” [Op. Cit., pp. 238-239] Meaning that even if co-operative do attract investors, the cost of so doing may be to transform the co-operatives into capitalist firms.

Thus, in spite of “empirical studies suggest[ing] that co-operatives are at least as productive as their capitalist counterparts,” with many having “an excellent record, superior to conventionally organised firms over a long period” [Jon Elster, Op. Cit., p. 96], co-operatives are more likely to adapt to capitalism than replace it and adopt capitalist principles of rationality in order to survive. All things being equal, co-operatives are more efficient than their capitalist counterparts – but when co-operatives compete in a capitalist economy, all things are not equal.

In spite of these structural and cultural problems, however, there has been a dramatic increase in the number of producer co-operatives in most Western countries in recent years. For example, Saul Estrin and Derek Jones report that co-operatives in the UK grew from 20 in 1975 to 1,600 by 1986; in France they increased from 500 to 1,500; and in Italy, some 7,000 new co-operatives came into existence between 1970 and 1982 [“Can Employee-owned Firms Survive?”, Working Paper Series, Department of Economics, Hamilton College (April, May, 1989)]. Italian co-operatives now number well over 20,000, many of them large and having many support structures as well (which aids their development by reducing their isolation and providing long term financial support lacking within the capitalist market).

We have already noted the success of the Mondragon co-operatives in Spain, which created a cluster of inter-locking co-operatives with its own credit union to provide long term financial support and commitment. Thus, in Europe at least, it appears that there is a rather “large and growing co-operative movement,” which gives the lie to Nozick’s and other supporters of capitalism arguments about co-operatives’ lack of economic viability and/or attractiveness to workers.

However, because co-operatives can survive in a capitalist economy it does not automatically mean that they shall replace that economy. Isolated co-operatives, as we argued above, will more likely adapt to capitalist realities than remain completely true to their co-operative promise. For most anarchists, therefore, co-operatives can reach their full potential only as part of a social movement aiming to change society. As part of a wider movement of community and workplace unionism, with mutualist banks to provide long terms financial support and commitment, co-operatives could be communalised into a network of solidarity and support that will reduce the problems of isolation and adaptation. Hence Bakunin:

“We hardly oppose the creation of co-operative associations; we find them necessary in many respects. . . they accustom the workers to organise, pursue, and manage their interests themselves, without interference either by bourgeois capital or by bourgeois control. . . [they must] above all [be] founded on the principle of solidarity and collectivity rather than on bourgeois exclusivity, then society will pass from its present situation to one of equality and justice without too many great upheavals.” [Op. Cit., p. 153]

Co-operation “will prosper, developing itself fully and freely, embracing all human industry, only when it is based on equality, when all capital . . . [and] the soil, belong to the people by right of collective property.” [Ibid.]

Until then, co-operatives will exist within capitalism but not replace it by market forces – only a social movement and collective action can fully secure their full development. As David Schweickart argues:

“Even if worker-managed firms are preferred by the vast majority, and even if they are more productive, a market initially dominated by capitalist firms may not select for them. The common-sense neo-classical dictum that only those things that best accord with people’s desires will survive the struggle of free competition has never been the whole truth with respect to anything; with respect to workplace organisation it is barely a half-truth.” [Op. Cit., p. 240]

This means that while anarchists support, create and encourage co-operatives within capitalism, they understand “the impossibility of putting into practice the co-operative system under the existing conditions of the predominance of bourgeois capital in the process of production and distribution of wealth.” Because of this, most anarchists stress the need for more combative organisations such as industrial and community unions and other bodies “formed,” to use Bakunin’s words, “for the organisation of toilers against the privileged world” in order to help bring about a free society. [Michael Bakunin, Op. Cit., p. 185]

While it may be admitted that co-operatives cannot reform capitalism away (see last section), many supporters of “free market” capitalism will claim that a laissez-faire system would see workers self-management spread within capitalism. This is because, as self-management is more efficient than wage slavery, those capitalist firms that introduce it will gain a competitive advantage, and so their competitors will be forced to introduce it or go bust. While not being true anarchistic production, it would (it is argued) be a very close approximation of it and so capitalism could reform itself naturally to get rid of (to a large degree) its authoritarian nature.

While such a notion seems plausible in theory, in practice it does not work. Free market capitalism places innumerable barriers to the spread of worker empowering structures within production, in spite (perhaps, as we will see, because) of their more efficient nature. This can be seen from the fact that while the increased efficiency associated with workers’ participation and self-management has attracted the attention of many capitalist firms, the few experiments conducted have failed to spread. This is due, essentially, to the nature of capitalist production and the social relationships it produces.

As we noted in section D.10, capitalist firms (particularly in the west) made a point of introducing technologies and management structures that aimed to deskill and disempower their workers. In this way, it was hoped to make the worker increasingly subject to “market discipline” (i.e. easier to train, so increasing the pool of workers available to replace any specific worker and so reducing workers power by increasing management’s power to fire them). Of course, what actually happens is that after a short period of time while management gained the upper hand, the workforce found newer and more effective ways to fight back and assert their productive power again. While for a short time the technological change worked, over the longer period the balance of forces changed, so forcing management to continually try to empower themselves at the expense of the workforce.

It is unsurprising that such attempts to reduce workers to order-takers fail. Workers’ experiences and help are required to ensure production actually happens at all. When workers carry out their orders strictly and faithfully (i.e. when they “work to rule”) production threatens to stop. So most capitalists are aware of the need to get workers to “co-operate” within the workplace to some degree. A few capitalist companies have gone further. Seeing the advantages of fully exploiting (and we do mean exploiting) the experience, skills, abilities and thoughts of their employers which the traditional authoritarian capitalist workplace denies them, some have introduced various schemes to “enrich” and “enlarge” work, increase “co-operation” between workers and their bosses. In other words, some capitalist firms have tried to encourage workers to “participate” in their own exploitation by introducing (in the words of Sam Dolgoff) “a modicum of influence, a strictly limited area of decision-making power, a voice – at best secondary – in the control of conditions of the workplace.” [The Anarchist Collectives, p. 81] The management and owners still have the power and still reap the majority of benefits from the productive activity of the workforce.

David Noble provides a good summary of the problems associated with experiments in workers’ self-management within capitalist firms:

“Participant in such programs can indeed be a liberating and exhilarating experience, awakening people to their own untapped potential and also to the real possibilities of collective worker control of production. As one manager described the former pilots [workers in a General Electric program]: ‘These people will never be the same again. They have seen that things can be different.’ But the excitement and enthusiasm engendered by such programs, as well as the heightened sense of commitment to a common purpose, can easily be used against the interests of the work force. First, that purpose is not really ‘common’ but is still determined by management alone, which continues to decide what will be produced, when, and where. Participation in production does not include participation in decisions on investment, which remains the prerogative of ownership. Thus participation is, in reality, just a variation of business as usual — taking orders — but one which encourages obedience in the name of co-operation.”Second, participation programs can contribute to the creation of an elite, and reduced, work force, with special privileges and more ‘co-operative’ attitudes toward management — thus at once undermining the adversary stance of unions and reducing membership . . .

“Thirds, such programs enable management to learn from workers — who are now encouraged by their co-operative spirit to share what they know — and, then, in Taylorist tradition, to use this knowledge against the workers. As one former pilot reflected, ‘They learned from the guys on the floor, got their knowledge about how to optimise the technology and then, once they had it, they eliminated the Pilot Program, put that knowledge into the machines, and got people without any knowledge to run them — on the Company’s terms and without adequate compensation. They kept all the gains for themselves.'” . . .

“Fourth, such programs could provide management with a way to circumvent union rules and grievance procedures or eliminate unions altogether. . .”

[Forces of Production, pp. 318-9]

Therefore, capitalist-introduced and supported “workers’ control” is very like the situation when a worker receives stock in the company they work for. If it goes some way toward redressing the gap between the value of that person’s labour, and the wage they receive for it, that in itself cannot be a totally bad thing (although, of course, this does not address the issue of workplace hierarchy and the social relations within the workplace itself). The real downside of this is the “carrot on a stick” enticement to work harder — if you work extra hard for the company, your stock will be worth more. Obviously, though, the bosses get rich off you, so the more you work, the richer they get, the more you are getting ripped off. It is a choice that anarchists feel many workers cannot afford to make — they need or at least want the money – but we believe that the stock does not work for many workers, who end up working harder, for less. After all, stocks do not represent all profits (large amounts of which end up in the hands of top management) nor are they divided just among those who labour. Moreover, workers may be less inclined to take direct action, for fear that they will damage the value of “their” company’s stock, and so they may find themselves putting up with longer, more intense work in worse conditions.

However, be that as it may, the results of such capitalist experiments in “workers’ control” are interesting and show why self-management will not spread by market forces (and they also bear direct relevance to the question of why real co-operatives are not widespread within capitalism — see last section).

According to one expert “[t]here is scarcely a study in the entire literature which fails to demonstrate that satisfaction in work is enhanced or. . .productivity increases occur from a genuine increase in worker’s decision-making power. Findings of such consistency, I submit, are rare in social research.” [Paul B. Lumberg, cited by Hebert Gintiz, “The nature of Labour Exchange and the Theory of Capitalist Production”, Radical Political Economy vol. 1, p. 252]

In spite of these findings, a “shift toward participatory relationships is scarcely apparent in capitalist production. . . [this is] not compatible with the neo-classical assertion as to the efficiency of the internal organisation of capitalist production.” [Herbert Gintz, Op. Cit., p. 252] Why is this the case?

Economist William Lazonick indicates the reason when he writes that “[m]any attempts at job enrichment and job enlargement in the first half of the 1970s resulted in the supply of more and better effort by workers. Yet many ‘successful’ experiments were cut short when the workers whose work had been enriched and enlarged began questioning traditional management prerogatives inherent in the existing hierarchical structure of the enterprise.” [Competitive Advantage on the Shop Floor, p. 282]

This is an important result, as it indicates that the ruling sections within capitalist firms have a vested interest in not introducing such schemes, even though they are more efficient methods of production. As can easily be imagined, managers have a clear incentive to resist participatory schemes (and David Schweickart notes, such resistance, “often bordering on sabotage, is well known and widely documented” [Against Capitalism, p. 229]). As an example of this, David Noble discusses a scheme (called the Pilot Program) ran by General Electric at Lynn, Massachusetts, USA in the late 1960s:

“After considerable conflict, GE introduced a quality of work life program . . . which gave workers much more control over the machines and the production process and eliminated foremen. Before long, by all indicators, the program was succeeding — machine use, output and product quality went up; scrap rate, machine downtime, worker absenteeism and turnover when down, and conflict on the floor dropped off considerably. Yet, little more than a year into the program — following a union demand that it be extended throughout the shop and into other GE locations — top management abolished the program out of fear of losing control over the workforce. Clearly, the company was willing to sacrifice gains in technical and economic efficiency in order to regain and insure management control.” [Progress Without People, p. 65f]

However, it could be claimed that owners, being concerned by the bottom-line of profits, could force management to introduce participation. By this method, competitive market forces would ultimately prevail as individual owners, pursuing profits, reorganise production and participation spreads across the economy. Indeed, there are a few firms that have introduced such schemes, but there has been no tendency for them to spread. This contradicts “free market” capitalist economic theory which states that those firms which introduce more efficient techniques will prosper and competitive market forces will ensure that other firms will introduce the technique.

This is for three reasons.

Firstly, the fact is that within “free market” capitalism keeping (indeed strengthening) skills and power in the hands of the workers makes it harder for a capitalist firm to maximise profits (i.e. unpaid labour). It strengthens the power of workers, who can use that power to gain increased wages (i.e. reduce the amount of surplus value they produce for their bosses).

Workers’ control basically leads to a usurpation of capitalist prerogatives — including their share of revenues and their ability to extract more unpaid labour during the working day. While in the short run workers’ control may lead to higher productivity (and so may be toyed with), in the long run, it leads to difficulties for capitalists to maximise their profits. So, “given that profits depend on the integrity of the labour exchange, a strongly centralised structure of control not only serves the interests of the employer, but dictates a minute division of labour irrespective of considerations of productivity. For this reason, the evidence for the superior productivity of ‘workers control’ represents the most dramatic of anomalies to the neo-classical theory of the firm: worker control increases the effective amount of work elicited from each worker and improves the co-ordination of work activities, while increasing the solidarity and delegitimising the hierarchical structure of ultimate authority at its root; hence it threatens to increase the power of workers in the struggle over the share of total value.” [Hebert Gintz, Op. Cit., p. 264]

So, a workplace which had extensive workers participation would hardly see the workers agreeing to reduce their skill levels, take a pay cut or increase their pace of work simply to enhance the profits of capitalists. Simply put, profit maximisation is not equivalent to technological efficiency. By getting workers to work longer, more intensely or in more unpleasant conditions can increase profits but does not yield more output for the same inputs. Workers’ control would curtail capitalist means of enhancing profits by changing the quality and quantity of work. It is this requirement which also aids in understanding why capitalists will not support workers’ control — even though it is more efficient, it reduces the ability of capitalists to maximise profits by minimising labour costs. Moreover, demands to change the nature of workers’ inputs into the production process in order to maximise profits for capitalists would provoke a struggle over the time and intensity of work and over the share of value added going to workers, management and owners and so destroy the benefits of participation.

Thus power within the workplace plays a key role in explaining why workers’ control does not spread — it reduces the ability of bosses to extract more unpaid labour from workers.

The second reason is related to the first. It too is based on the power structure within the company but the power is related to control over the surplus produced by the workers rather than the ability to control how much surplus is produced in the first place (i.e. power over workers).

Hierarchical management is the way to ensure that profits are channelled into the hands of a few. By centralising power, the surplus value produced by workers can be distributed in a way which benefits those at the top (i.e. management and capitalists). Profit maximisation under capitalism means the maximum profits available for capitalists — not the maximum difference between selling price and cost as such. This difference explains the strange paradox of workers’ control experiments being successful but being cancelled by management. The paradox is easily explained once the hierarchical nature of capitalist production (i.e. of wage labour) is acknowledged. Workers’ control, by placing (some) power in the hands of workers, undermines the authority of management and, ultimately, their power to control the surplus produced by workers and allocate it as they see fit. Thus, while workers’ control does reduce costs, increase efficiency and productivity (i.e. maximise the difference between prices and costs) it (potentially) reduces profit maximisation by undermining the power (and so privileges) of management to allocate that surplus as they see fit.

Increased workers’ control reduces the capitalists potential to maximise their profits and so will be opposed by both management and owners. Indeed, it can be argued that hierarchical control of production exists solely to provide for the accumulation of capital in a few hands, not for efficiency or productivity (see Stephan A. Margin, “What do Bosses do? The Origins and Functions of Hierarchy in Capitalist Production”, Op. Cit., pp. 178-248). This is why profit maximisation does not entail efficiency and can actively work against it.

As David Noble argues, power is the key to understanding capitalism, not the drive for profits as such:

“In opting for control [over the increased efficiency of workers’ control] . . . management . . . knowingly and, it must be assumed, willingly, sacrificed profitable production. Hence [experiences such as] the Pilot Program [at GE] . . . illustrates not only the ultimate management priority of power over both production and profit within the firm, but also the larger contradiction between the preservation of private power and prerogatives, on the one hand, and the social goals of efficient, quality, and useful production, on the other . . .”It is a common confusion, especially on the part of those trained in or unduly influenced by formal economics (liberal and Marxist alike), that capitalism is a system of profit-motivated, efficient production. This is not true, nor has it ever been. If the drive to maximise profits, through private ownership and control over the process of production, it has never been the end of that development. The goal has always been domination (and the power and privileges that go with it) and the preservation of domination. There is little historical evidence to support the view that, in the final analysis, capitalists play by the rules of the economic game imagined by theorists. There is ample evidence to suggest, on the other hand, that when the goals of profit-making and efficient production fail to coincide with the requirements of continued dominance, capital will resort to more ancient means: legal, political, and, of need be, military. Always, behind all the careful accounting, lies the threat of force. This system of domination has been legitimated in the past by the ideological invention that private ownership of the means of production and the pursuit of profit via production are always ultimately beneficial to society. Capitalism delivers the goods, it is argued, better, more cheaply, and in larger quantity, and in so doing, fosters economic growth . . . The story of the Pilot Program — and it is but one among thousands like it in U.S. industry — raises troublesome questions about the adequacy of this mythology as a description of reality.”

[Forces of Production, pp. 321-2]

Hierarchical organisation (i.e. domination) is essential to ensure that profits are controlled by a few and can, therefore, be allocated by them in such a way to ensure their power and privileges. By undermining management authority, workers’ control undermines that power to maximise profits in a certain direction even though it increases “profits” (the difference between prices and costs) in the abstract. As workers’ control starts to extend (or management sees its potential to spread) into wider areas such as investment decisions, how to allocate the surplus (i.e. profits) between wages, investment, dividends, management pay and so on, then they will seek to end the project in order to ensure their power over both the workers and the surplus they, the workers, produce. In this they will be supported by those who actually own the company who obviously would not support a regime which will not ensure the maximum return on their investment. This maximum return would be endangered by workers’ control, even though it is technically more efficient, as control over the surplus rests with the workers and not a management elite with similar interests and aims as the owners — an egalitarian workplace would produce an egalitarian distribution of surplus, in other words (as proven by the experience of workers’ co-operatives). In the words of one participant of the GE workers’ control project — “If we’re all one, for manufacturing reasons, we must share in the fruits equitably, just like a co-op business.” [quoted by Noble, Op. Cit., p. 295] Such a possibility is one no owner would agree to.

Thirdly, to survive within the “free” market means to concentrate on the short term. Long terms benefits, although greater, are irrelevant. A free market requires profits now and so a firm is under considerable pressure to maximise short-term profits by market forces (a similar situation occurs when firms invest in “green” technology, see section E.5).

Participation requires trust, investment in people and technology and a willingness to share the increased value added that result from workers’ participation with the workers who made it possible. All these factors would eat into short term profits in order to return richer rewards in the future. Encouraging participation thus tends to increase long term gains at the expense of short-term ones (for it ensures that workers do not consider participation as a con, they must experience real benefits in terms of power, conditions and wage rises). For firms within a free market environment, they are under pressure from share-holders and their financiers for high returns as soon as possible. If a company does not produce high dividends then it will see its stock fall as shareholders move to those companies that do. Thus the market forces companies (and banks, who in turn loan over the short term to companies) to act in such ways as to maximise short term profits.

If faced with a competitor which is not making such investments (and which is investing directly into deskilling technology or intensifying work loads which lowers their costs) and so wins them market share, or a downturn in the business cycle which shrinks their profit margins and makes it difficult for the firm to meet its commitments to its financiers and workers, a company that intends to invest in people and trust will usually be rendered unable to do so. Faced with the option of empowering people in work or deskilling them and/or using the fear of unemployment to get workers to work harder and follow orders, capitalist firms have consistently chosen (and probably preferred) the latter option (as occurred in the 1970s).

Thus, workers’ control is unlikely to spread through capitalism because it entails a level of working class consciousness and power that is incompatible with capitalist control. In other words, “[i]f the hierarchical division of labour is necessary for the extraction of surplus value, then worker preferences for jobs threatening capitalist control will not be implemented.” [Hebert Gintiz, Op. Cit., p. 253] The reason why it is more efficient, ironically, ensures that a capitalist economy will not select it. The “free market” will discourage empowerment and democratic workplaces, at best reducing “co-operation” and “participation” to marginal issues (and management will still have the power of veto).

In addition, moves towards democratic workplaces within capitalism is an example of the system in conflict with itself — pursuing its objectives by methods which constantly defeat those same objectives. As Paul Carden argues, the “capitalist system can only maintain itself by trying to reduce workers into mere order-takers. . . At the same time the system can only function as long as this reduction is never achieved. . . [for] the system would soon grind to a halt. . . [However] capitalism constantly has to limit this participation (if it didn’t the workers would soon start deciding themselves and would show in practice now superfluous the ruling class really is).” [Revolution and Modern Capitalism, pp. 45-46]

The experience of the 1970s supports this thesis well. Thus “workers’ control” within a capitalist firm is a contradictory thing – too little power and it is meaningless, too much and workplace authority structures and short-term profits (i.e. capitalist share of value added) can be harmed. Attempts to make oppressed, exploited and alienated workers work if they were neither oppressed, exploited nor alienated will always fail.

For a firm to establish committed and participatory relations internally, it must have external supports – particularly with providers of finance (which is why co-operatives benefit from credit unions and co-operating together). The price mechanism proves self-defeating to create such supports and that is why we see “participation” more fully developed within Japanese and German firms (although it is still along way from fully democratic workplaces), who have strong, long term relationships with local banks and the state which provides them with the support required for such activities. As William Lazonick notes, Japanese industry had benefited from the state ensuring “access to inexpensive long-term finance, the sine qua non of innovating investment strategies” along with a host of other supports, such as protecting Japanese industry within their home markets so they could “develop and utilise their productive resources to the point where they could attain competitive advantage in international competition.” [Op. Cit., p. 305] The German state provides its industry with much of the same support.

Therefore, “participation” within capitalist firms will have little or no tendency to spread due to the “automatic” actions of market forces. In spite of such schemes being more efficient, capitalism will not select them because they empower workers and make it hard for capitalists to maximise their short term profits. Hence capitalism, by itself, will have no tendency to produce more libertarian organisational forms within industry. Those firms that do introduce such schemes will be the exception rather than the rule (and the schemes themselves will be marginal in most respects and subject to veto from above). For such schemes to spread, collective action is required (such as state intervention to create the right environment and support network or — from an anarchist point of view — union and community direct action).

However such schemes, as noted above, are just forms of self-exploitation, getting workers to help their robbers and so not a development anarchists seek to encourage. We have discussed this here just to be clear that, firstly, such forms of structural reforms are not self-management, as managers and owners still have the real power, and, secondly, even if such forms are somewhat liberatory, market forces will not select them (i.e. collective action would be required).

For anarchists “self-management is not a new form of mediation between workers and their bosses . . . [it] refers to the very process by which the workers themselves overthrow their managers and take on their own management and the management of production in their own workplace.” [Sam Dolgoff, Op. Cit., p. 81] Hence our support for co-operatives, unions and other self-managed structures created and organised from below by and for working class people.